Digital music sales up - CD's are down

The music industry is changing. Everyone knows it. But this story from Rolling Stone magazine really brings it home. And the numbers are staggering. CD sales are down and digital downloads are up. Way up. How else do you feed almost 11 million iPods received as Christmas gifts? 19 million digital single downloads, making Apple's iTunes store one of the top ten music retailers in the U.S., ahead of Tower Records and Sam Goody.

For the first time in history, digital downloads are outselling CD's. 2005 saw a seven percent drop in CD sales. About 48 million fewer CD's were sold in 2005 than the previous year. In 2000, the industry's last boom year, the top five albums -- including megahits by Britney Spears and Eminem -- sold a combined 38 million copies. The top five in 2005 sold just 19.7 million, including hits from Mariah Carey, Green Day, and Kelly Clarkson.

So what's the download? In 2005, digital downloads became a major moneymaker for the first time, earning more than $500 million as sales of digital tracks jumped from 141 million in 2004 to 353 million in 2005, and sales of digital albums rose from 5.5 million to 16.2 million.

Ring tones were even more profitable, as revenues doubled to $600 million.

So as the major music labels are suffering losses, the independent labels grew to 18 percent of total album sales in 2005. Maybe that's why we're seeing more digital labels using the internet to market their bands and artists. Ironworks Music and Cordless Recordings come to mind.

It seems the old models don't work anymore. Buying a CD in a store is out...download the latest tunes to your computer or digital music player, and make your own CD's or build up your digital library. And with the iPod Nano holding one thousand songs (the 4GB model,) it's easier than ever.

So what's the future hold? Probably about 200GB of your favorite songs in the palm of your hand. You've got the iPod standard, Nano, and Shuffle. And with latin music sales on the rise, maybe we'll see the first iPod from Latin America...the i yi yi.

Related Tags: Rolling Stone magazine, iTunes, Tower Records, Sam Goody, digital downloads, CD, Mariah Carey, Green Day, Kelly Clarkson, music